Hey! Whose Finger is in the Punch Bowl?

April 4, 2011

AT&T wants to buy T-Mobile. AT&T made an offer. T-Mobile has agreed. It should be a fairly straightforward transaction and no more complicated than you or I buying milk from the grocery store. Oh but wait, as they say, there’s more! Since we are not a society that embraces capitalism, but rather socialism, there is government to contend with before this simple transaction can happen.

Yes, here we are once again. We are watching the federal government stick its finger in the punch bowl again, stir it around and tell us to drink up afterwards. The AT&T/T-Mobile merger is just the latest example.

Remember the economic crash a few years ago? The one where the nation was dragged down into the depths of despair by millions of Americans defaulting on mortgages no reasonable person would have ever signed off on? Yep, that was government meddling too. The Community Reinvestment Act and a cadre of other federal government mandates prompted banks to put every Tom, Dick and Harry into a home whether they could reasonably afford it or not. The government even used the enticement of Fannie Mae and Freddie Mac, which would buy these bad loans, no questions asked, to poke and prod lenders into compliance. And what if lenders would not comply? What if they still defied the government and chose to not act in an economically stupid manner? Well, all sorts of things from their access to federal money being curtailed to threats of audits were wielded against them.

Yep. That worked out so well didn’t it? Sure, let’s let the federal regulators tackle regulating capitalism in the cell phone service provider realm too!

Dear God in Heaven help us.

Understandably some of AT&T competitors are a little anxious over this deal. Sprint Nextel Corp. is already kvetching and complaining that the deal would hurt its own bottom line. An executive with Sprint, Fared Adib, whined, "When one competitor has that much buying power they can determine the fate of different products.”

Well, golly gee! I was not aware that AT&T should be concerned about the fact that its competition is not able to deal with a changing business environment and whether products its competitors may want do not become profitable. And why should AT&T worry about Sprint’s ability to adapt? It certainly is not in AT&T’s best interest. Mr. Adib is of course hypocritical. He would not be bellyaching about a company gaining leverage in “buying power” if it were his own company. That is a guarantee. In fact, I guarantee you that Sprint is out there every day looking for ways to leverage its own “buying power” to lower its own costs and increase its profits.

And what if they are not? Well, then I would suggest never investing in Sprint stock for sure!

Henry Ford, as I have previously discussed, often said that many people who run businesses have no idea how to run those businesses and how economics works on its most basic level. Obviously, Sprint Nextel Corp. is one such company whose ownership and management structure falls into that category.

Other providers, that are small in nature, are also sure to get very antsy about the merger as it would hamper their ability to gain market share. Some of these companies may even think that they should go to the government and convince those in Washington to act outside of their Constitutional authority on this matter and stop the merger.

Verizon is also no doubt very concerned about this, considering when it comes to cell phone services in the United States they and AT&T are the big cocks on the walk.

One report I have seen talks about how in order for AT&T to curry favor with the federal government and gain approval for the deal, it would have to divest itself of assets. Say what? Wait a minute here! I am flipping through my pocket Constitution looking for where in it the federal government is given the power to break up companies and dictate what they must do in order to buy out other companies. But that is not all. Apparently some are also having discussions about how, in order to get the deal done, AT&T not only has to sell off parts of its company, but it may even be forced to expand services to places where it is obviously not profitable to do so. Because if it was profitable AT&T would be doing it already! You know how it goes. Some aggrieved group thinks that they are owed better cell phone service access and they are going to make sure they get it by hook or by crook.

Nope. I cannot find anything regarding that power of our government in the Constitution either. So it seems logical that the federal government does not have it. Sorry for introducing facts into this discussion. I know it will upset some people.

Listen, whether you like AT&T is not the issue here. And it should have absolutely no bearing on how you feel about this deal. Personally I have AT&T as my cell phone service provider. Are they flawless? Nope. But I do get a big hoot every time someone with Verizon, Sprint, Boost Mobile, Cricket, or whatever company you can name tells me how great their coverage is and how crappy AT&T's is. Within minutes what usually winds up happening is they are sitting around, looking for a signal while I am able to pop out my iPhone and talk almost anywhere I have ever been.

Do I think AT&T over charges for services? Yep. Have I left them yet? Nope because I have a signal just about everywhere I have ever been. Does their customer service pretty much stink? Oh, yeah. So I just try to not use it.

The government needs to butt out of the free markets. We have seen the wreckage they have left in their wake when they interfere. I dread the day I wake up and see the headline proclaiming how the government manipulated cell phone service market crashed and millions of Americans who bought unaffordable phones and service plans have started to just walk away from their contracts.

Yeah, it sounds silly. So did the thought that millions of home owners would walk away from their government incentivized mortgages too not that long ago.